THE PERFORMANCE OF CONGLOMERATE FIRMS: RECENT RISK AND RETURN EXPERIENCE

EXAMINATION OF THE RECENT RELATIVE PERFORMANCE OF TWO GROUPS OF FIRMS WHICH WERE OPERATING IN THE SAME BASIC INDUSTRIES AT THE BEGINNING OF THE 1960S. ONE GROUP SUBSEQUENTLY BECAME CONGLOMERATES WHILE THE OTHER DID NOT. THE DATA PRESENTED IN THIS STUDY SUGGESTS THAT WHILE THE CONGLOMERATE FIRMS ACHIEVED A LEVEL OF PERFORMANCE COMPARABLE TO THE CONSIDERED NON-COMGLOMERATE FIRMS, THEIR PERFORMANCE WAS NOT AT ALL OUTSTANDING. HENCE, CONGLOMERATE DIVERSIFICATION MAY BE AN EFFECTIVE MEANS FOR OBTAINING DEFENSIVE DIVERSIFICATION, BUT IT DOES NOT SEEM TO BE AN EFFECTIVE MEANS FOR OBTAINING SUPERIOR OR OUTSTANDING PERFORMANCE. THE TWO GROUPS OF FIRMS WERE FOUND TO BE HIGHLY COMPARABLE IN TERMS OF MARKET PERFORMANCE AND THEIR OPERATING PROFITABILITY CHARACTERISTICS.